#4 - How Not to Run an Economy

What is the thinking behind the economic policy espoused by Egypt’s latest government (ie, the one appointed and formalized yesterday, not to be confused with the two other cabinets that have come and gone in the past five weeks)? Seemingly, a hopeful return to the unmitigated failures of state-led growth plans that promises to have Egypt become one of the BRIC members, only as Bolivia rather than Brazil. One million new nurses needed at state-owned hospitals? Sure, why not? May as well add another couple of dozen to the guys manning the automated parking machine at Cairo Airport too, since the other 350 or so that already are there seem overworked. The endless delays in reopening the stock market, and the various, increasingly strained theories used to justify doing so, is having a highly detrimental effect on investor confidence, as evidenced, by among other things, a massively undersubscribed bond offering (notwithstanding junk-bond type yields). One way to guarantee losing investor confidence is to deny people access to their own money.

So far, the government has hidden behind the illusion of relatively marginal movements in longer-term macroeconomic indicators, and proudly pointed to exchange rate stability (itself, a misguided barometer of economic performance that is misusing foreign reserves and punishing further the already beleaguered Egyptian exporters to subsidize commodity imports). The wider population seems to have accepted the line that all of this is understandable in the context of a political revolution – but it should not.

People should be demanding an accountable, modern and growth-oriented economy, just as they are in terms of opening up the political system. Fanciful national projects, false promises of recovering and redistributing hundreds of billions of pounds from targeted figures of the past, and begging Egypt’s way out of its mess through foreign aid, will just entrench all of the deficiencies Egypt has suffered from for so many years.

It is time to wake up and smell the coffee.

...patiently waiting to invest